News, Analysis and Perspective for Solution Providers and Technology Integrators

On its Q4 and year-end earnings call, the network security vendor said it had reorganized its sales force in a move toward better profitability and better management of multinational accounts.

By
Sarah KurandaJanuary 28, 2016, 07:55 PM EST

Fortinet has reorganized its sales force in a move company executives said would better position the network security vendor to handle multinational accounts and capitalize on its platform-based approach to drive profitability.

"We have a strong technology road map and a strong innovative road map in place, to help us continue to grow our market position and address our huge market opportunity," CEO Ken Xie said on the company's Q4 earnings call, where the sales force changes were unveiled. "From the start, our vision was to deliver broad, truly integrated, high-performance security across the IT infrastructure. We are seeing that play up in the market now and we are well-positioned to continue our success."

The sales force changes eliminate the U.S. Enterprises team, redistributing it into two groups focusing on either large global strategic accounts or regional territories, and creates a single, unified sales force. The now globally integrated sales force will be led by longtime company veteran Patrice Perche, now executive vice president of global sales and support.

In an email to CRN, a Fortinet spokesperson said the reorganization is not likely to impact channel partners.

"We haven't made and don't expect any significant changes to the Channel Organization," the spokesperson said.

The reorganization is part of "positive changes to enhance sales structure," CFO Andrew Del Matto said on the call. Del Matto said the new sales force structure will help Fortinet win and support multinational companies much more effectively. Those changes will drive better operating margins for the company by increasing sales productivity and creating a return on marketing investment, Del Matto said.

"Investments in the business have laid the groundwork for future growth and profitability," Del Matto said. Fortinet aims to exceed 20 percent operating margins exiting 2020. It predicts operating margins going into 2016 will be around 15 percent, he said.

The changes are already largely complete, Del Matto said, occurring before the start of the year and trickling though January.

Del Matto said Fortinet investors can expect to see some short-term disruption to its sales, something he said the company accounted for in its expectations for the next quarter. He said it will likely take close to six months for the new team to get fully up and running.

"Change is always a challenge. It absolutely comes with a risk of disruption," Del Matto said. "I would say it feels like we have the right people in place to do the right things to get to the right end."

During the earnings call, Fortinet reported fourth-quarter revenues of $296.5 million, up 32 percent year over year, and a net loss of $2.5 million, down from a profit of $6.8 million in the same quarter last year. For the full year, Fortinet reported revenue of $1.01 billion, up 31 percent year over year. It also reported earnings for the full year of $8 million, down from $25.3 million in 2014.

Del Matto said the rising revenue shows the payoffs of the company's "land and expand" sales strategy, as well as increased investments in marketing and its platform-based approach. He said Fortinet saw strong competitive wins in the quarter, including displacing competitors to take new clients and expand within existing large enterprise accounts.

Going forward, Fortinet predicted first-quarter revenues to be between $270 million and $275 million, up 28 percent year over year, and billings to be between $315 million and $322 million. The company expects Non-GAAP earnings per share for the quarter to be between $0.08 and $0.09. For the full year 2016, Fortinet said it expects billings to be between $1.505 billion and $1.52 billion, up 23 percent year over year, and revenues to be between $1.25 billion and $1.26 billion, up 24 percent year over year. It expects Non-GAAP earnings per share to be between $0.67 and $0.69 per share.